Li & Fung profit falls 47 pct in tough global retail market

Donny Kwok

(Recasts, adds comments and details)

HONG KONG, March 29 (Reuters) - Li & Fung Ltd,

which supplies clothing and other products to retailers around

the world, on Wednesday reported a 47 percent fall in 2016 net

profit and said tough conditions in the global retail industry

would put pressure on its business.

Li & Fung, which made its name by making clothing and toys

for Western retailers, is battling a difficult economic climate

as well as competition from online rivals.

The company said in a statement a highly promotional

environment was likely to continue in all markets, and retail

destocking would persist.

"I expect an unprecedented number of bankruptcies and store

closures in the years to come," chief executive officer Spencer

Fung told a news conference, referring to the global retail

industry. "I remain cautious as (the) operating environment is

deteriorating."

The group said it aimed to achieve low double digit growth

in revenue and core operating profit by 2019.

Li & Fung said an immediate first step to improve its

performance was to reorganise the company into two parts, one

focused on services and the other on products.

CEO Fung said the company had no plans to spin off any part

of its business at present but would continue to simplify its

structure.

Li & Fung said its net profit for 2016 fell to $223 million,

from $421 million a year earlier, missing expectations.

Analysts were expecting a profit of $246 million, according

to Thomson Reuters SmartEstimate data.

Revenue fell 11 percent to $16.8 billion from a year

earlier, while core operating profit dropped 19.6 percent to

$412 million.

Li & Fung has refocused on its core supply chain business

following the sale of its loss-making brand-licensing and

distribution business in 2014, which helped to increase its cash

flow and control operating costs.

Li & Fung's shares closed 0.5 percent lower ahead of the

earnings announcement, lagging a 0.2 percent rise in the

benchmark Hang Seng Index.

Hong Kong's stock index compiler in February said it would

remove Li & Fung as a constituent of the Hang Seng Index,

replacing it with Geely Automobile Holdings Ltd,

sending Li & Fung's shares to a 14 year low.

(Reporting by Donny Kwok; Editing by Randy Fabi and Jane

Merriman)